Torrid Holdings, Inc.
The law firm of Kirby McInerney LLP announces that a class action lawsuit has been filed in the U.S. District Court for the Central District of California on behalf of those who acquired Torrid Holdings, Inc. (“Torrid or the “Company”) (NYSE: CURV) securities pursuant and/or traceable to the Registration Statement and Prospectus (collectively, the “Registration Statement”) issued in connection with Torrid’s July 2, 2021 initial public offering (“IPO”); and/or (b) that purchased or otherwise acquired Torrid securities during the period from July 2, 2021 through November 16, 2022 (the “Class Period”). Investors have until January 13, 2023 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
Torrid is a direct-to-consumer brand of women’s plus-size apparel and intimates.
Leading up to the IPO, Torrid claimed to be experiencing rapid sales growth and an impressive recovery following a temporary downturn in the face of the initial phases of the COVID-19 pandemic, which began in March 2020.
On July 2, 2021, Torrid conducted its IPO, selling 12.65 million shares at $21.00 per share.
On March 17, 2022, Torrid issued a release announcing the Company’s financial results for its fourth fiscal quarter and year ended January 29, 2022. The release stated that Torrid’s sales growth continued to decelerate to just 4.5% growth during the quarter. The release also stated that Torrid’s adjusted EBITDA margin had fallen to just 9% of net sales largely as a result of continued supply chain disruptions and increased transportation and product costs. The release provided annual 2022 net sales guidance of between $1.3 billion and $1.365 billion and annual 2022 adjusted EBITDA guidance of between $195 million and $220 million.
On September 7, 2022, Torrid issued a release announcing the Company’s financial results for its second fiscal quarter ended July 30, 2022. The release revised downward Torrid’s annual 2022 net sales guidance from a range of $1.3 billion to $1.365 billion to a range of $1.26 billion to $1.3 billion, which would be essentially flat year-over-year, and revised downward Torrid’s annual 2022 adjusted EBITDA guidance from a range of $195 million to $220 million to a range of $160 million to $175 million, which would be significantly worse than Torrid’s fiscal 2021 adjusted EBITDA of $246 million.
By the end of September 2022, the price of Torrid stock fell to a low of just $4.06 per share, over 80% below the IPO price. At the time of the filing of the complaint, the price of Torrid common stock has remained significantly below the IPO price.
The lawsuit alleges that, throughout the Class Period, Defendants made false and/or misleading statements and/or failed to disclose that: (i) in the first half of 2021, Torrid had experienced a temporary surge in demand as a result of changed consumer behaviors in response to the COVID-19 pandemic and government stimulus and that such ephemeral demand trends had dissipated and were not internally projected to continue following the IPO; (ii) Torrid was suffering from severe supply chain disruptions caused by the emergence of the Delta variant of COVID-19, which had first emerged in May 2021; (iii) Torrid was running materially below historical inventory levels as a result of supply chain disruptions; (iv) as a result, Torrid did not have sufficient inventory to meet expected consumer demand for its fiscal third quarter of 2021; (v) as a result, late inventory arrival had materially impaired the Company from effectively matching consumer buying trends, creating an undisclosed risk of increased markdowns and promotional activities necessary to sell undesirable inventory; and (vi) Torrid’s CFO planned to retire shortly after the IPO.